Money Walks

Wow, this was a very busy week and I’m glad the weekend is finally here. Lately these past few weeks, I’ve been so busy I’ve fallen behind on calculating this months net worth so hopefully I’ll get that done tomorrow. But anyway, I wanted to leave guys with some general finance tips you can carry over this weekend.

• Save the pennies and the dollars will save themselves. The small amounts really do add up.
• Make the effort to educate yourself about personal finance. Go around and find some financial magazines and books.
• Don’t forget to budget! Operating without a budget is like driving a car without a steering wheel, you have no control.
• Start taking savings out of your paychecks before you even see it. After a while, you will get used to planning your spendings around your lower amount and at the same time your savings will grow.
• Be smart and not cheap. You don’t want to buy cheap items that don’t last.
• Be aware of your debt and don’t let your spending get out of control. If you notice yourself headed for trouble, act quickly before you ruin your credit.

Keep these tips in mind while you start your weekend and remember, millionaires are just average people who practice good habits. You could be one of them.

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So today I decided to take a look at my Money Market account, which I usually try to check only once a month, and saw that the interest rate went from 5.30% to 4.90%. I was surprised that my initial reaction wasn’t disappointment but rather quite passive. There was a point in time where I used to think that every one hundredth of a percent counted and mattered and that I would find the best money market account accordingly. But the truth is, unless you have a nice amount of money, say a million dollars, it really doesn’t matter too much.

I think people who are new to finance and just started saving have this same problem just as I did. People are always looking to get the highest percentage rate on their interest, but the thing is, the percentage rate really doesn’t matter unless you’re dealing with substantial amount of money. Instead of concentrating on trying to find an account that offers a percent higher than the current one you’re considering, you should put that energy into concentrating on how to stay saving for more than 3 months. Most Americans fall short on their savings goals, I don’t have a percentage rate to offer you but I’m sure its quite high. The personal savings rate in the United States is a negative number, but majority of Americans think of themselves as people who “always look for ways to save money“.

So back to the money market account, lets do a quick example to demonstrate what I’m talking about.

For the sake of my story, lets use my interest rate(in case you were wondering, my account is with Gmacbank) at 4.90%, which used to be at 5.30%. We’ll say account 1 has $5,000 and account 2 has $500,000. Lets crunch some numbers.

Account 1($5,000):
In one year, at 4.90%, this would make $245/year ($20.42/month).
Now at 5.30%, we get $265/year ($22.08/month).
So not a huge difference eh? Just 20 more bucks a year or $1.66 a month. I somehow doubt I’ll even notice this small difference. Now account 2 on the other hand…

Account 2($500,000):
In one year with 4.90%, this account would make $24,500/year ($2,041.66/month).
At 5.30%, this account would be $26,500/year ($2,208.33/month).
Now in this case, the difference is quite notable. This account dropping by as little as .4% makes a difference of $2,000/year and $166.67. If I was in this case, my reaction most probably would have been quite different than that of today.

The point I’m trying to make is don’t worry about the percentages now and focus more on getting our accounts to $500,000. Lets continue saving and worry about the minor details later. Chances are, you don’t have $500,000 so percentage rate is not going to help you become rich, well at least not now. The idea of saving on the other hand is a complete different story.

Quick note: If you are looking for a place to put your money into for savings and also concerned with not having to worry about commitment, then you should really consider looking into getting a money market account. I strongly suggest going with Gmacbank. I’m not saying this because they’re paying me or anything like that but just from my personal experience, they really have it well together. They are really helpful each time I call and all my calls end with the feeling of satisfaction. For more information, you can go here.

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Last week I had briefly talked about how you shouldn’t cancel any credit cards before applying for a loan and that brought me to write up a general post on credit cards.

You may already have a credit card, but if you don’t I can almost guarantee you that there will be many opportunities to get one once you step foot on campus. There are many credit companies who set up tables on college campuses to encourage students to sign up for their credit cards. They even offer neat gifts like T-shirts, water bottles, key chains, pens, mugs, etc. in exchange for having you fill out an application. It all sure sound easy and tempting but you want to think twice before you do it.

Just like loans, credit cards can help you build a positive credit report. Having a nice credit history can help you in many ways like receiving private loans, buying a car, renting an apartment, even helping you get a job. There are tons of advantages of having a credit card but in return, it can also affect you negatively if you misuse it.

Like most things, there are advantages and disadvantages to credit cards. Knowing some of these can help you decide if you do or do not want to use credit cards.

Here are some advantages for credit cards.

• Credit cards are becoming more and more widely used
• Great way to keep track of your expenses
• Helps in times of emergencies
• Reduces the need to carry cash or checks
• Helps build responsibility and independence
• Helps to improve credit score
• Credit card offers rewards
• Protection of purchase
• and obviously, its very convenient

Onto the Disadvantages…

• Easy use = easily in debt
• Credit cards not paid on time can have negative effect on credit score
• Credit cards can be confusing and stressful
• Have complicated terms and conditions
• Allows you to build up more debt than you can handle
• Can have high interest rates and fees

Credit cards can make life a lot easier and be a great tool, but if they aren’t used wisely they can become a huge financial burden. We live in a society of “I want” culture and a “I want it now” one at that. Credit cards is definitely something that will always be growing more and more in demand and only when we start to learn how to manage our finances and how to save money will we ever get rid of the burden that associates with debt.

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